Well, the reason as explained by the Terminal Disk was a bit involved, but to keep it spoiler free...
Basically, there was a fire at the CC Corp building that housed the servers for The World. Over 75% of the data was lost. Around that time, however, CC Corp had been working on a steam-punk game. To prevent from the game being shut down, CC Corp merged whatever data was left from The World with their new game. The result was The World: V.2. Many things were changed, including the designs of the characters, since the majority of the data was from the unfinished game.
You're only young once, but you're NEVER too old to be immature.
...there's no way I'm making this up; I totally remember hearing it from somewhere else first!
Searching through youtube, I found my answer on Terminal Disk Files 8-10...kinda.
Does anyone else know where I got that from, though? I mean, I KNOW that's it's mentioned in some official .hack product, but I'm not sure where now...ugh.
You're only young once, but you're NEVER too old to be immature.